Are you interested in learning about the basics of trading? If so, one of the essential tools you need to master is the bar chart. Read ahead to find out what exactly it means and how it works!
What Is A Bar Chart?
A bar chart, also known as a price bar, is a tool used in technical analysis to show the price movements of a security over a particular time frame.
What You Need To Know About Bar Charts
A bar chart can be used to analyze different types of securities, including stocks, bonds, commodities, and various currencies. It is implemented by traders to identify trends and patterns in the market and make informed trading decisions.
Aside from knowing the bar chart definition, there are other key aspects you need to know to make the most out of this tool. First, you must understand the time frame of the chart. Bar charts can represent different periods, such as days, weeks, or months. The time frame you choose depends on your trading style and the assets you are analyzing.
Second, you need to understand how to read the bar chart. Each bar on the chart represents a specific period, and the vertical height of the bars demonstrates the price range. The top of the bar shows the highest price of an asset during that time, while the bottom of the bar reflects the lowest price.
The opening and closing prices are indicated by ticks on either side of the bar. A bar that has a closing price that’s higher than the opening one is called a bullish bar. Conversely, a bar where the closing price is lower than the opening one is called a bearish bar.
Note that a bar chart can be used alone or in combination with other technical indicators, such as moving averages, as a means to help traders identify potential market opportunities.
